OSI Pharmaceuticals Inc. (OSIP) – A put butterfly spread enacted on biotechnology firm, OSI Pharmaceuticals, today indicates one investor expects shares of the underlying stock to decline ahead of July expiration. OSIP’s shares are trading 0.05% higher on the day to $60.10 as of 11:50 am (NYSE:ET). The bearish options strategy involved the purchase of 2,000 puts at the July $60 strike for an average premium of $2.88 each [wing 1] and the purchase of 2,000 puts at the lower July $50 strike for a premium of $1.30 apiece [wing 2]. The investor established the body of the butterfly spread by selling 4,000 put options at the central July $55 strike for a premium of $1.65 each. The net cost of the pessimistic play amounts to $0.88 per contract. Therefore, the trader responsible for the transaction is prepared to accrue maximum potential profits of $4.12 per contract should OSIP shares fall approximately 8.5% from the current price to $55.00 ahead of July expiration day. The investor only ever risks losing the $0.88 per contract paid for the trade, but stands ready to amass more than 4.6 times that amount should shares of the underlying stock slump to $55.00 at expiration.
Bon-Ton Stores, Inc. (NASDAQ:BONT) – Shares of the regional department store operator slipped 0.40% to $15.55 during the first half of the trading session, but did not deter one investor from banking gains on a previously established long call position. It looks like the trader originally purchased approximately 9,300 calls at the July $15 strike for an average premium of $0.95 apiece back on March 25, 2010, when Bon-Ton’s shares traded up to an intraday high of $12.62. In the past few weeks since the trader purchased the call options, Bon-Ton Stores’ shares rallied approximately 24.8% up to Friday’s new 52-week high on the stock at $15.75. Thus, the investor was able to sell the now in-the-money call options today for an average premium of $2.20 apiece to pocket net profits of $1.25 per contract. Finally, the options player extended bullish sentiment on the department store operator by purchasing a fresh batch of 8,500 calls at the higher July $17.5 strike for a premium of $1.25 per contract. Profits accumulate on the new position if Bon-Ton’s shares rally another 20% from the current price of $15.55 to surpass the effective breakeven point at $18.75 by expiration day in July.
Under Armour, Inc. (NYSE:UA) – The maker of technologically advanced athletic and sports apparel and accessories enticed bullish investors to the options field today as its share price increased more than 3.25% to secure a new 52-week high of $33.34. Options players expecting the price of the underlying shares to continue to appreciate ahead of May expiration purchased more than 1,800 calls at the May $35 strike for an average premium of $1.45 per contract. Call-buyers profit if Under Armour’s shares rally 9.3% over the new 52-week high of $33.34 to exceed the effective breakeven price on the calls at $36.45 by expiration day next month. The increase in investor demand for call options on the stock lifted UA’s overall reading of options implied volatility 15.6% to 47.98% as of 12:15 pm (ET).
SPDR S&P Retail ETF (NYSEARCA:XRT) – Shares of the XRT, an exchange-traded fund that attempts to replicate the performance of the S&P Retail Select Industry Index, slipped slightly lower by 0.15% to $42.73 during the first half of the trading day. One bearish investor’s put activity on the XRT today indicates shares of the underlying fund could decline significantly by September expiration. The trader purchased a debit put spread by picking up 10,000 puts at the September $37 strike for a premium of $1.03 each, marked against the sale of 10,000 puts at the lower September $31 strike for $0.27 apiece. The net cost of the spread amounts to $0.76 per contract, thus positioning the investor to amass maximum potential profits of $5.24 per contract if the XRT’s share price plummets 27.45% from the current price to $31.00 by September expiration day.